Labour has accused the government of failing to read the unprecedented mood among investors over spiralling executive pay as the business secretary, Vince Cable, signalled he is likely to row back on plans to give shareholders binding annual votes on remuneration.

The move comes as investors – on a war footing over boardroom pay – are expected to vote heavily against a controversial new pay deal for Sir Martin Sorrell, chief executive of the advertising group WPP, at an annual shareholder meeting in Dublin on Wednesday.

A defeat for the company would take the tally of FTSE 100 pay revolts in the same AGM season to an unprecedented three. Cairn Energy and Aviva saw angry investors outvote supporters of pay arrangements for top executives at heated shareholder meetings last month. Defeat for WPP would also take the number of revolts across UK listed companies to six – another record.

At present such votes are no more than a passing embarrassment for companies because directors are not required by law to reflect the views on pay of those who own the company.

On Sunday night the shadow business secretary, Chuka Umunna, said: "At a time when shareholders are becoming more assertive and activist in their approach, the government appears to be turning the other way, showing itself to be out of step with the tide of investor opinion.

"The prime minister said he wanted to empower shareholders, but has failed to stand up to vested interests and match these words with action. Instead of driving the change we need to see, he has fallen at the first hurdle."

Cable is understood to be clinging on to plans to introduce a binding vote on pay, but is looking at a watered down approach where pay deals might go before investors every three years. The benefits of such a move have split governance groups, with the Association of British Insurers and Manifest seeing merits in a triennial vote, while Pirc advocates a yearly ballot on executive pay.

Moves to water down plans for a binding vote came as the latest clash over FTSE 100 executive pay took a new twist. WPP and its leading shareholders were blaming each other for derailing months of backroom talks that could have averted what is now universally expected to be a humiliating revolt.

A source close to WPP insisted blame for the failure to agree acceptable pay terms with major shareholders before Wednesday's meeting lay not with the group's remuneration committee but with certain rebel institutional investors. Specifically, the source pointed to a confidential proposal from committee chairman Jeffrey Rosen to bump up Sorrell's salary by 50%, which was disclosed to the Guardian last September.

However, the suggestion that institutional investors are to blame for Rosen's committee pushing through fiercely opposed pay plans was met with incredulity by shareholder groups. One well-informed source suggested Rosen had approached the consultation process last summer with a series of proposals he ought to have known would be met with widespread opposition.

Senior investors have let it be known that they feel Rosen's final proposals, at the end of the consultation, failed to address outstanding concerns and that the first some knew about his controversial conclusions was when they read the annual report.

Sorrell's response to a 42% protest vote on pay at WPP's annual shareholder meeting last year was cited by Cable's department as a prime example of "companies not responding adequately to shareholder concerns". In response Sorrell reportedly played down the protest, suggesting: "This strikes me as being a matter of excessive micro-managing [on the part of WPP shareholders]."

Over the weekend, WPP chairman Philip Lader, who sits alongside Rosen on the five-person remuneration committee, told reporters he would redouble efforts to engage with shareholders after Wednesday's meeting. Thought to hold sufficient proxy votes to know the outcome of the ballot, he said: "The board has the responsibility to exercise the best commercial judgment and we did so with careful extensive deliberation as we have sought to explain to shareholders ... That said, while directors are expected to exercise their judgment, we're also responsible to shareholders."